Title

Privatization and the Law and Economics of Political Advocacy

Abstract

A common argument against privatization is that private providers, motivated by self-interest, will advocate changes in substantive policy. In this Article, I evaluate this argument, using, as a case study, the argument against prison privatization based on the possibility that the private prison industry will distort the criminal law by advocating incarceration.

This “political influence” argument applies at least as well to public provision: Government agencies, too, lobby for changes in substantive law. In the prison industry, for instance, it is unclear whether private firms advocate incarceration to any significant extent, but public guard unions are known to do so actively.

Moreover, adding the “extra voice” of the private sector will not necessarily increase either the amount of pro-incarceration advocacy or its effectiveness. Prison privatization may well reduce the political power of the pro-incarceration forces: Because advocacy is a “public good” for the industry, as the number of independent actors increases, the largest actor’s advocacy decreases (since it no longer captures the full benefit of its advocacy) and the smaller actors free-ride off the largest actor’s contribution. Under some plausible assumptions, privatization decreases advocacy, and under different plausible assumptions, the net effect of privatization on advocacy is ambiguous.

The argument that prison privatization distorts criminal law by fostering pro-incarceration advocacy is thus unconvincing without a fuller explanation of the mechanics of advocacy. The use of the political influence argument in other privatization contexts may also be theoretically unsound, to the extent it does not consider whether privatization reduces preexisting levels of public sector advocacy.

Disciplines

Administrative Law | Economics | Law and Economics | Law and Politics | Law Enforcement and Corrections

Date of this Version

November 2006